Circular No.: 196/08/2023-GST
Date of Circular: 17th July 2023
Relevant Sections and Rules:
- CGST Act, 2017:
- Section 2(52): Definition of goods (excludes securities)
- Section 2(102): Definition of services (excludes securities)
- Section 7: Definition of supply
- Section 168(1): Power to issue instructions
- Securities Contracts (Regulation) Act, 1956:
- Section 2(h): Definition of securities (includes shares)
Summary of Clarification Provided:
Clarification on Taxability of Holding Shares in Subsidiary Companies:
The CBIC has clarified that holding of shares in a subsidiary company by a holding company does not constitute a supply of goods or services under the GST law.
- Securities, including shares, are expressly excluded from the definitions of both goods and services under the CGST Act.
- The mere act of holding shares, even if classified under SAC 997171 in the service classification scheme (which refers to services by holding companies for controlling interest), does not amount to a supply as per Section 7 of the CGST Act unless there is a concrete supply of services.
Hence, such activity is not taxable under GST. The clarification ensures no GST liability arises solely from holding share capital in subsidiaries.
Source: Circular No.: 196/08/2023-GST
